Eskom mulls new coal options, seeks supplier bids

10th January 2006 By: Nicola Mawson

State-owned electricity provider Eskom has issued a tender in which it indicates that it is evaluating alternative coal sources for possible supplies to its power stations.

The utility has called for the “registration of interest to provide mining consulting services to Eskom”.

Coal makes up the bulk of South Africa's electricity needs but it is not clear where the bulk of coal reserves are located, according to Department of Minerals and Energy (DME) chief mineral economist in the area of coal and hydrocarbons Xavier Prevost.

The department is already looking into a 'coal inventory', which should give South Africa some idea of where the fuel to power the imminent energy upswing will be coming from.

According to a 2004 survey undertaken by the Minerals Bureau, a DME unit, 35% of South Africa's coal is to be found in the Highveld, and the coal-rich Waterberg saw much of its reserves pronounced as resources, leaving it with 3%.

Witbank accounts for 33% of coal reserves while 15% of reserves are in Ermelo.

Some 90% of South Africa's coal reserves are seen to be in the Central Basin area that includes Witbank, Ermelo and the highveld.

This area also accounted for 81% of South Africa's output last year, said Prevost.

Now, it seems that Eskom is seeking sustainable sources of coal to fuel its own expansions.

The utility indicated that, as part of the evaluation process, certain studies and due-diligence work must be performed, including geologic modelling of coal resources, selection of appropriate mining methods and equipment for specified coal resources as well as designing coal-mine layouts and mine plans - including infrastructure.

Also included in Eskom's list of services to be provided are aspects such as mine scheduling, labour planning and preparation of mine capital and operating cost estimates and cash flows.

It also requires the development of environmental management plans for mines.

These services, it says, can be provided to either Eskom itself or to a party already contracted to Eskom.

However, the utility requires information on the tendering firm's black economic-empowerment status as well as information on whether the firm has access to specific software, such as that required for geologic modelling.

Eskom added in its tender advertisement published at the weekend that it required resumes of staff available to work “on projects for Eskom during 2006 and 2007,” indicating that the project is of an urgent nature.

Tenders close at 13:00 on January 27.

Public Enterprises Minister Alec Erwin has already indicated that parastatals such as Eskom and Transnet are to spend several billion in infrastructure upgrade over the next few years and Eskom has embarked on an ambitious programme to stave off an impending power crises in the near future.

Addressing parliament in February last year, Erwin said that some R107-billion in spend would be needed between 2005 and 2009 to meet the country's growing energy needs.

He added that Eskom was to invest R84-billion over the next five years, both in new stations, such as gas turbines, and in refurbishing older coal-fired stations.

This is all part of its plan to add some 5 306 MW of power to the distribution network by 2009.

While Eskom is not the only firm investing in more power to meet growing demands, as the department of Minerals and Energy has also entered the scene, the utility's first priority is bringing back online three coal stations.

The stations were all mothballed when South Africa had excess power and are now being refurbished.

The refurbishment of the three mothballed power stations - Camden in Ermelo (1 600 MW), Grootvlei in Balfour (1 200 MW) and Komati in Middleburg (1 000 MW) - will result in an additional 3 800 MW being added to the system, said Erwin.

Eskom will spend about R12-billion on the recommissioning of these three stations.

This is about 40% of the cost of a new station.

“Almost half the scope of work is merely maintenance similar to that done on the running plant. Approximately 10% of the costs go towards improving environmental performance, such as particulate emissions and water controls.”

At least 36 000 jobs are expected to be created - directly and indirectly -until 2007 during both construction and operational phases, added Erwin.